Trusts Flashcards
NY Savings Statute
Testator presumed to intend for interests to vest within RAP period.
NY Suspension statute
NO fragmentation of estate past perpetuities period. Some combo of people must be capable of conveying fee simple during perpetuities period.
Requirements for trust
1) Intent
2) Trust property
- not “mere expectancy”
3) valid trust purpose
- nothing illegal or against public policy.
4) beneficiaries
- sufficiently definite, ascertainable at time of taking.
5) in writing, signed by settlor and one trustee, notarized or executed in presence of witnesses. (NO oral trusts).
No specific words necessary, BUT presumption against trust creation UNLESS uses word “trust.”
Legitimate charitable purposes
1) relief of poverty
2) advancement of education or religion
3) promotion of good health
4) government/municipal purpose
5) benefit community at large
- AG of NY has authority to enforce.
NY trusts for pets
Expire automatically after 21 years.
Cy pres
Can reform charitable trust if it becomes:
1) illegal
2) impractical
3) impossible to perform
Fake “trusts”
1) Honorary trust: when someone tries to leave property to impermissible beneficiary.
2) resulting trust: trust fails, trustee must return property to settlor.
3) constructive trust: equitable remedy in case of wrongful conduct. Elements:
i) confidential or fiduciary relationship
ii) promise
iii) transfer of property in reliance on promise
iv) unjust enrichment.
3 types of trusts
1) Mandatory trust
- attachable by creditors to extent of mandatory component.
2) Discretionary trust
- trustee cannot abuse discretion.
- creditors cannot attach.
3) Support trust
4) Spendthrift trust
- beneficiary may not transfer equitable title.
- NY presumes all trusts to be spendthrift.
- NOT attachable by creditors, EXCEPT:
i) alimony and child support
ii) necessities
iii) tax liens
iv) income beyond that necessary for lifestyle.
Termination of trust
Revocable: settlor only.
Irrevocable: settlor and beneficiary.
-NY presumes trusts are irrevocable.
Automatic termination when purpose accomplished.
- Claflin doctrine: trust cannot be terminated if material purpose remains.
- spendthrift trusts cannot be terminated because they always have asset protection purposes.
When can beneficiary have trustee removed?
1) trustee incapable
2) trustee materially breached duties.
- NO self dealing. if there is self dealing, then trustee is liable as per “no further inquiry rule.”
3) conflict of interest
- BUT NOT is apparent to settlor when creating trust.
4) serious conflict between trustee and beneficiaries
5) persistent poor performance due to trustee’s actions.
Trustee balance of current and future beneficiaries
Must consider:
1) intent of settlor and language off trust instrument.
2) nature and duration of trust.
3) identity and circumstances of beneficiaries.
4) relative need for income, capital, and liquidity.
5) net amount allocated to income.
6) anticipated effect of economic conditions on income and principal.
7) tax consequences.
If trustee is lifetime beneficiary, he may NOT use UPIA, but instead pays out fixed percentage to trust assets to the income beneficiary.
Trustee duties and responsibilities
1) loyalty and good faith
2) no self-dealing
3) segregate funds
4) invest soundly / duty of prudence
5) duty to sell and diversify
Requirements of pour-over gift to an inter vivos trust
1) validly executed
2) revocable
3) created before or simultaneously with the will.
